House passes surplus lines, reinsurance regulatory reform legislation
The U.S. House of Representatives passed legislation on Sept. 27 that would apply single-state regulation and uniform standards to the nonadmitted insurance and reinsurance marketplace. H.R. 5637, The Non-Admitted and Reinsurance Reform Act of 2006, passed the House by a vote of 417-0.
Agents, brokers and insurers applauded the passage, which marks the first attempt by the federal government to modernize the insurance regulatory system.
“This bill’s common-sense, pragmatic approach is just what we need to get the ball rolling on real reform of insurance regulation,” said Independent Insurance Agents and Brokers of America CEO Robert A. Rusbuldt. “We believe it not only eliminates duplication in surplus lines regulation, but that it can also serve as a shining example of how responsible insurance reform can occur – by using targeted federal legislation to address areas of concern while retaining the strengths of the current regulatory system.”
H.R. 5637 establishes national standards for how states regulate the surplus lines market and creates a uniform system of surplus lines premium tax allocation and remittance, one-state compliance on multi-state surplus lines risks, and direct access to the surplus lines market for sophisticated commercial purchasers.
“This is an important milestone toward ultimately improving the operation and regulation of the surplus lines market,” said National Association of Professional Surplus Lines Offices President William Newton.
In addition to surplus lines, H.R. 5637 also affects reinsurance. It would give the ceding insurer’s state of domicile sole authority to govern reinsurance contracts and determine whether a particular reinsurance contract qualifies for credit for reinsurance. It would also prohibit states from applying their laws in an extra-territorial manner and provide uniform regulation of reinsurer solvency based upon National Association of Insurance Commissioner accreditation standards.
H.R. 5637, first introduced by Reps. Ginny Brown-Waite, R-Fla., and Dennis Moore, D-Kan., on June 19, is a slimmed-down version of the proposed State Modernization and Regulatory Transparency Act (SMART), which deals with regulation of all lines of insurance. Waite and Moore pulled out pieces of the SMART legislation that target non-admitted insurance and reinsurance in an effort to speed the legislation’s path through Congress.
While the bill has not been introduced in the Senate, industry groups feel its passage in the House is an important first step for future regulatory reform legislation.
“H.R. 5637 is an important first step in the effort to reform a state-based regulatory system that is becoming increasingly burdensome for insurers across the country,” said Ben McKay, Property Casualty Insurers Association of America senior vice president, Government Affairs. “We encourage the Senate to address this important bill as soon as possible.”
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